2025 (1) TMI 1082 - HC - GST

Challenge to adjudication order passed under Section 74 (9) of the WBGST/CGST Act 2017 - appellant claimed input tax credit against supply received form non-existent RTPs whose registration has been cancelled - submissions not considered entirely - violation of principles of natural justice - HELD THAT - The submissions does not appear to have been considered by the assessing officer as there is no recording of any finding with regard to the decisions which were relied on by the assessee. Two major issues had to be considered by the adjudicating authority namely the effect of retrospective cancellation of the registration of the suppliers and the aspect as to whether the purchaser/appellants have proved movement of goods. This exercise appears to have not been done by the adjudicating authority and therefore the matter has to be re-adjudicated by taking note of all the factual issues bearing in mind the legal principles laid down in various decisions. Though the reply to the pre-show cause notice dated 6.10.2023 gives the necessary details and the documents which have been annexed the appellants should submit a fresh reply dealing with all issues with liberty to place the decisions of the various courts on which they seek to place reliance. The order passed in the writ petition is set aside and the order passed by the adjudicating authority under Section 74 (9) of the Act dated 10.07.2024 is set aside and the matter is remanded back to the adjudicating authority for a fresh decision on merits and in accordance with law after affording opportunity of personal hearing to the authorized representative of the appellants. Appeal allowed by way of remand.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

a. What is the effect of the retrospective cancellation of a supplier's registration on the purchaser's claim of Input Tax Credit (ITC) under the WBGST/CGST Act, 2017?

b. Whether the appellants have sufficiently demonstrated the movement of goods to justify their ITC claims?

c. How should the adjudicating authority address the appellants' reliance on legal precedents concerning the retrospective cancellation of supplier registration?

2. ISSUE-WISE DETAILED ANALYSIS

Issue a: Effect of Retrospective Cancellation of Supplier's Registration

Relevant legal framework and precedents: The appellants referenced Section 16(2) of the WBGST/CGST Act, 2017, which outlines the conditions for availing ITC. They argued that their compliance with these conditions should protect their ITC claims despite the retrospective cancellation of their suppliers' registrations. They relied on prior judgments, including those from the Division Bench of the Calcutta High Court and the Supreme Court, to support their position.

Court's interpretation and reasoning: The court noted that the adjudicating authority failed to consider the implications of retrospective cancellation and did not address the appellants' reliance on relevant legal precedents.

Key evidence and findings: The appellants provided documentation, including tax invoices, e-way bills, and bank statements, to support their ITC claims. However, the adjudicating authority did not adequately analyze this evidence in light of the retrospective cancellation issue.

Application of law to facts: The court highlighted the need for a thorough examination of whether the appellants met the conditions under Section 16(2) and how the retrospective cancellation affected their ITC claims.

Treatment of competing arguments: The appellants' argument was that retrospective cancellation should not affect their rights if they complied with Section 16(2). The adjudicating authority's failure to address this argument was a key oversight.

Conclusions: The court concluded that the adjudicating authority must re-evaluate the effect of retrospective cancellation on the appellants' ITC claims, considering the legal principles established in relevant precedents.

Issue b: Demonstration of Movement of Goods

Relevant legal framework and precedents: Section 16(2) of the Act requires evidence of the receipt of goods for ITC claims. The appellants argued they provided sufficient documentation to prove the movement of goods.

Court's interpretation and reasoning: The court found that the adjudicating authority did not adequately consider the evidence provided by the appellants regarding the movement of goods.

Key evidence and findings: The appellants submitted tax invoices, e-way bills, kata slips, bank statements, and ledger copies. The adjudicating authority's order did not reflect a detailed analysis of this evidence.

Application of law to facts: The court emphasized the need for the adjudicating authority to assess whether the appellants' documentation satisfied the requirements of Section 16(2).

Treatment of competing arguments: The appellants maintained that their documentation was sufficient, while the adjudicating authority cast doubt on the nature of the suppliers' businesses without addressing the evidence of goods movement.

Conclusions: The court directed the adjudicating authority to reconsider the evidence of goods movement and make a fresh determination on the appellants' ITC claims.

Issue c: Consideration of Legal Precedents

Relevant legal framework and precedents: The appellants cited various legal precedents to support their position on retrospective cancellation and ITC claims.

Court's interpretation and reasoning: The court noted that the adjudicating authority failed to consider these precedents in its decision-making process.

Key evidence and findings: The appellants' submissions included references to decisions by the Division Bench of the Calcutta High Court and the Supreme Court.

Application of law to facts: The court underscored the importance of considering relevant legal precedents when adjudicating ITC claims.

Treatment of competing arguments: The court acknowledged the appellants' reliance on legal precedents and criticized the adjudicating authority for not addressing these arguments.

Conclusions: The court instructed the adjudicating authority to consider the appellants' cited precedents in its reevaluation of the case.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "In our view, two major issues had to be considered by the adjudicating authority, namely, the effect of retrospective cancellation of the registration of the suppliers and the aspect as to whether the purchaser/appellants have proved movement of goods."

Core principles established: The court emphasized the necessity of a comprehensive evaluation of ITC claims, considering both statutory requirements and relevant legal precedents. It highlighted the importance of addressing retrospective cancellation and evidence of goods movement in such evaluations.

Final determinations on each issue: The court set aside the adjudicating authority's order and remanded the matter for a fresh decision. It directed the adjudicating authority to consider the appellants' additional reply and provide an opportunity for a personal hearing. The court did not render any findings on the merits, leaving the final determination to the adjudicating authority upon reevaluation.